OFC History - Modern OFC's
Contrary to the image and money laundering theme projected by Hollywood in movies such as "The Firm, Quicksand, Hard Cash and Scarface" the majority of modern offshore financial centres are responsible members of the international community.
Due to these movies, offshore financial centres generally conjure up thoughts of criminal activity and money laundering. However, most people legally use the services provided by offshore financial centres to plan and structure their financial affairs. Offshore trusts and bank accounts are legal and ideal for asset protestion, minimising personal tax liabilities and avoiding forced heirship legislation which may exist in Civil Law countries.
The nil tax offshore financial centre of Bermuda was Patrick Rafter's choice of domicile for residency purposes at the height of his tennis career.
The modern offshore financial centre is typically responsible and sophisticated
In order to ensure their services are not being used for fraudulent or money laundering purposes, an offshore service provider will follow thorough "know your client" (KYC) due diligence procedures. This usually involves face to face meetings, proof of identity such as a passport, reference letters from banks and other respected professionals and a thorough knowledge of the provenance of the funds to be transferred.
Many of the more reputable modern offshore financial centres also have enacted anti money laundering legislation. This legislation requires anyone, particularly professionals working in the financial services industry, to report any person whom he knows or suspects is invloved in "serious crime" or who is dealing with "the proceeds of criminal conduct".
On the 27th April 1998, the OECD published a report titled "The Report On Harmful Tax Competition - An Emerging Global Issue". This report generated considerable international scrutiny regarding offshore financial centres. Following this report and its investigations the OECD published the names of 47 jurisdictions that engaged in "harmful" tax practices on a blacklist and invited OECD member states to impose sanctions. To be removed from the blacklist or to avoid being added to it, jurisdictions were required to give an advance commitment to allow information sharing relating to tax matters.
The Cayman Islands Monetary Authority oversees The Proceeds of Criminal Conduct Law which was enacted in 1996. This law has subsequently been revised in 1999 and again in 2001.
The Bermuda Monetary Authority oversees the Proceeds of Crime Act 1997. This act was susequently amended in 1999 and 2000. There is also the Proceeds of Crime (Money Laundering) Regulation 1998.
In Curacao, the Central Bank of the Netherlands Antilles regulates the following:
- The Netherlands Antilles National Ordinance on Penalization of Money Laundering 1993.
- The National Ordinance Identification when rendering Financial Services 1996.
- The National Ordinance on Reporting of Unusual Transactions 1996.
Recently a bilateral treaty was signed between Australia and Bermuda concerning the exchange of information with respect to taxes. This agreement is to have effect from 01st January, 2006.
In February 2007, the Netherlands Antilles and Australia also signed a Tax Information Exchange Agreement.
If you desire to learn more about the world of offshore financial centres, the following website is very informative: www.lowtax.net.
